(Adds closing U.S. prices)

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Dow Industrials extends winning streak to seven days

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FTSE hits record high as BoE edges toward cut

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Europe's STOXX 600, Germany's DAX hit record peaks

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U.S. jobless claims rise more than expected

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Herbert Lash and Marc Jones

NEW YORK/LONDON, May 9 (Reuters) - World stocks rallied

on Thursday, led by surging European shares and a

larger-than-expected rise in U.S. weekly jobless claims that

buoyed interest rate cut hopes, while the dollar eased as the

market awaits key inflation data next week.

The pan-European STOXX 600 and Britain's FTSE 100

rose 0.19% and 0.33%, respectively, to scale new record

highs, after the Bank of England kept rates unchanged but

suggested a cut is imminent. Germany's DAX also hit a

peak.

Following a sluggish open, the major U.S. indices pulled

higher with the Dow industrials rising for a seventh straight

session. New signs of a softening labor market provided hope the

Federal Reserve might cut rates as soon as September.

U.S. initial claims for state unemployment benefits

increased more than expected by 22,000 to a seasonally adjusted

231,000 for the week ended May 4, the Labor Department said.

"It's a relatively quiet week, but initial jobless claims

came in weaker. We're still clearly in that 'bad news is good

news' macro regime," said Matt Miskin, co-chief investment

strategist at John Hancock Investment Management in Boston.

"We'll have to see if that's the beginning of a trend. That

is one of the biggest jumps we've seen in quite a while."

The combination of earnings coming in better than expected

and interest rates falling is propelling U.S. stocks, said James

Ragan, director of Wealth Management Research at D.A. Davidson

in Seattle.

"There's a feeling that aggressive earnings estimates for

the year are more achievable after having a pretty good first

quarter season," Ragan said. "The Fed has made it very clear

that the next move is going to be lower, it's just a matter of

the timing on that."

MSCI's gauge of stocks across the globe

closed up 0.38%. The Dow Jones Industrial Average

advanced 0.85% for its seventh straight day of gains. The S&P

500 gained 0.51% and the Nasdaq Composite 0.27%.

In Britain, investors cheered indications more policymakers

are warming to cutting rates. Two of BoE's nine rate setters,

one more than in April, voted for a cut and Governor Andrew

Bailey said more could be on the way than investors expect.

The BoE sent a message that bets on the first cut being in

August might be too conservative as it lowered its inflation

forecasts for two and three years' time to 1.9% and 1.6% - below

its 2% target - from its February projections of 2.3% and 1.9%.

The dollar index, a measure of the U.S. currency

against a basket of six others, including the yen and the euro,

fell 0.28% to 105.22. The euro rose 0.34% to $1.0781 and

the yen fell 0.09% to 155.420 per dollar.

Sterling rebounded to strengthen 0.2% at $1.2521.

Benchmark Treasury yields retreated on relief that all $125

billion in new note and bond supply this week was absorbed

smoothly.

The yield on benchmark 10-year Treasury note

fell 2.4 basis points to 4.459%, while the two-year note's

yield, which typically moves in step with interest

rate expectations, fell 3 basis points to 4.8133%.

BULLS IN THE CHINA SHOP

Overnight in Asia, Chinese trade data and some property

market developments had helped Chinese stocks continue their

recent outperformance. MSCI's dollar-denominated China index has

jumped more than 13% over the past two months.

Customs figures showed that China's imports jumped 8.4% in

April from a year earlier, beating expectations for a rise of

4.8%, while exports returned to growth, meeting forecasts, in a

boost to economic growth.

That helped Chinese shares build on earlier gains, with

blue-chip stocks ending up almost 1% and Hong Kong's

Hang Seng index increasing 1.2%. News that China's

eastern metropolis Hangzhou will lift all home purchase

restrictions in the ailing property sector, a key pillar of

domestic demand, also boosted sentiment.

Property shares surged 2.5% as a result.

In other markets, Japan's Nikkei reversed earlier

gains to finish down 0.3%. Australia's resources-heavy share

market lost 1.1% while South Korea also

retreated 1.2%.

U.S. crude settled up 27 cents at $79.26 a barrel and

Brent rose 30 cents to $83.88 a barrel.

Gold prices rose more than 1% after the new unemployment

claims data reinforced rate cut bets.

U.S. gold futures for June delivery settled 0.8%

higher at $2,340.30 per ounce.

Bitcoin gained 1.59% at $62,555.92.